Capitalise of opeating expenses

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vinit (Querist)
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08 April 2010 Iam incurring expenses before i made first sale around 25,00,000/- (like Labour/Rent/Electricity/marketfees) and can i show as work in progress or can i put it fixed assets and clain depreciation or debit to profit and loss account
is there any standard wil applicable

Aditya Maheshwari

Aditya Maheshwari (Expert)
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09 April 2010 Para 9.3 of AS - 10 is reproduced here and it should clear your doubt

9.3 The expenditure incurred on start-up and commissioning of the project, including the expenditure incurred on test runs and experimental production, is usually capitalised as an indirect element of the construction cost. However, the expenditure incurred after the plant has begun commercial production, i.e., production intended for sale or captive consumption, is not capitalised and is treated as revenue expenditure even though the contract may stipulate that the plant will not be finally taken over until after the satisfactory completion of the guarantee period.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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09 April 2010 So you can capitalise the same and claim depreciation on the same as start up costs

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